"This imaginary person out there - Mr. Market - he's
kind of a drunken psycho. Some days he gets very enthused, some days he gets
very depressed. And when he gets really enthused, you sell to him and if he
gets depressed you buy from him. There's no moral taint attached to that."
- Warren
Buffett
“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
ISM MANUFACTURING (prnewswire.com)
"The July PMI® registered 54.2 percent, up 1.6
percentage points from the June reading of 52.6 percent. This figure indicates
expansion in the overall economy for the third month in a row after a
contraction in April, which ended a period of 131 consecutive months of growth…’The
growth cycle continues for the second straight month after three prior months
of COVID-19 disruptions. Demand and consumption continued to drive
expansion growth, with inputs remaining at parity with supply and demand. Among
the six biggest industry sectors, Food, Beverage & Tobacco Products remains
the best-performing industry sector, with Chemical Products, Computer &
Electronic Products and Petroleum & Coal Products growing respectably.
Transportation Equipment and Fabricated Metal Products continue to contract,
but at soft levels,’ says [Timothy R. Fiore, CPSM,
C.P.M., Chair of the Institute for Supply
Management® (ISM®) Manufacturing Business Survey Committee].” Press
release at…
AUTO SALES (Reuters)
“U.S. new vehicle sales in July continued to show signs
of recovery from the coronavirus pandemic, as Toyota Motor Corp on Monday posted
its lowest sales decline since the COVID-19 outbreak slammed the sector in
mid-March. The Japanese automaker said that its sales in July fell 19% versus
the same month in 2019…”
CASH AS A HEDGE (Real Investment Advice)
“I want to stress that I am not talking about being 100%
in cash. I am suggesting that holding higher levels of cash during periods of
uncertainty provides both stability and opportunity. With the political,
fundamental, and economic backdrop becoming much more hostile toward investors
in the intermediate term, understanding the value of cash as
a “hedge” against loss becomes much more important.” Commentary at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:40 PM Monday. The US had about 33,000 new cases today. This is a lower
number than we have seen recently. We often see a lag in reporting over the weekend
and sometimes on Monday, but if this is decline is the start of a trend, it
would be good news.
-Monday the S&P 500 rose about 0.7% to 3295.
-VIX dipped about 0.7% to 24.28.
-The yield on the 10-year Treasury rose to 0.559%.
The S&P 500 did climb above its prior high of 3232,
so it is making some bullish progress, however, there are issues. We saw the
number of Bear-signs outpace the Bull-signs Friday. One of those indicators is
the 40-day moving average of the percentage of new-highs. It is rolling over
suggesting a pullback or more flat to weak trading. That is reinforced by the
fact that the S&P 500 is now too far above its 200-dMA when Sentiment is
considered.
The daily sum of 20 Indicators improved from -5 to
-2 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that smooths the daily fluctuations declined from -7 to -9. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
It sure feels like we are near a top and now we see some
cracks in the advance that may show my “feeling” is correct. Still, the market
can go higher if Mr. Market wants to. It
just looks like the odds are against going too much higher it in the near term.
Perhaps the Bollinger Bands and RSI will signal The Top.
MOMENTUM ANALYSIS:
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
The top ranked ETF receives 100%. The rest are then
ranked based on their momentum relative to the leading ETF.
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
The top ranked stock receives 100%. The rest are then
ranked based on their momentum relative to the leading stock.
For more details, see NTSM Page at…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained NEUTRAL on the market.
Market Internals are a decent trend-following analysis of
current market action, but should not be used alone for short term trading.
They are usually right, but they are often late. They are most useful when they diverge from the
Index. In 2014, using these internals
alone would have made a 9% return vs. 13% for the S&P 500 (in on Positive,
out on Negative – no shorting).
Using the Short-term indicator in 2018 in SPY would have
made a 5% gain instead of a 6% loss for buy-and-hold. The methodology was Buy
on a POSITIVE indication and Sell on a NEGATIVE indication and stay out until
the next POSITIVE indication. The back-test included 13-buys and 13-sells, or a
trade every 2-weeks on average.
My current stock allocation is about 40% invested in
stocks. You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance. 40% is a conservative position that I re-evaluate
daily. It is not far below my fully invested position which would be between
50-60%.
As a retiree, 50% in the stock market is about fully
invested for me – it is a cautious and conservative number. If I feel very
confident, I might go to 60%; had we seen a successful retest of the bottom,
80% would not have been out of the question.
